The putative class action lawsuits consolidated into this 1

action are as follows: (1) Beryl Price, Charlotte Price, and

Joseph Healy v. AmerUs Group Co., AmerUs Annuity Group Co.,

American Investors Life Insurance Co., Inc., Barry O. Bohmueller,

Brian J. Newmark, Estate Planning Advisors Corp., BEN Consulting

Co., Funding & Financial Services, Victoria Larson, and Kenneth

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE: AMERICAN INVESTORS :

LIFE INSURANCE CO. ANNUITY : MDL DOCKET NO. 1712

MARKETING AND SALES PRACTICES :

LITIGATION :

MEMORANDUM

McLaughlin, J. December 18, 2009

The plaintiffs have moved for certification of a class,

final approval of a settlement, and an award of attorneys’ fees,

costs and incentive payments in this case involving the sale of

long-term deferred annuities products. The defendants do not

oppose the motion. The Court held a hearing on November 6, 2009,

and now grants the plaintiffs’ motion and enters final judgment

and an order of dismissal.

I. Background

A. Overview

This action is a multi-district litigation proceeding

that involves six consolidated putative class action lawsuits,

the oldest of which has been pending before this Court for five

years. On October 26, 2005, the Judicial Panel on Multidistrict 1
Krygowski, No. 2:04-cv-3329 (E.D. Pa. July 15, 2004); (2) George

Miller v. AmerUs Group Co., AmerUs Annuity Group Co., American

Investors Life Ins. Co., National Western Life Insurance Co.,

American Equity Investment Life Insurance Co., Brian J. Newmark,

Estate Planning Advisors Corp., BEN Consulting Co., Funding &

Financial Services, Patriot Group, Addison Group, Brett

Weinstein, Victoria Larson, and Stephen Strope, No. 2:04-cv-3799

(E.D. Pa. Aug. 11, 2004); (3) Richard Stein, Dena Stein, and Mary

Lynch v. AmerUs Group Co., AmerUs Annuity Group Co., American

Investors Life Insurance Co., Inc., Creative Marketing

International Corp., Insurance Agency Marketing Services, Inc.,

and American Investors Sales Group, Inc., No. 2:05-cv-2391 (E.D.

Pa. May 19, 2005); (4) Dorothy Eddy v. AmerUs Life Insurance Co.,

No. 6:05-cv-1006-JA-JGG (M.D. Fla. July 7, 2005); (5) Evelyn

Edwards v. AmerUs Group Co., AmerUs Annuity Group Co., American

Investors Life Insurance Co., Inc., and Senior Benefit Services

of Kansas, Inc., 8:05-cv-1590-T27-TBM (M.D. Fla. Aug. 26, 2005);

and (6) Jean Ryles v. AmerUs Life Insurance Co., American

Investors Life Insurance Co., Inc., AmerUs Annuity Group Co., and

AmerUs Group Co., No. 2:05-cv-6340 (E.D. Pa. Dec. 8, 2005).

 The defendants are: AmerUs Group Company (now known as 2

Aviva USA Corporation), AmerUs Annuity Group Company, American

Investors Life Insurance Company, AmerUs Life Insurance Company

(now known as Aviva Life and Annuity Company), Creative Marketing

International Corporation, and Insurance Agency Marketing

Services, Inc.

2

Litigation transferred the related actions to this Court. The

actions were consolidated for pretrial purposes on November 11,

2005. 

The Court granted the defendants’ motion to dismiss on

June 2, 2006, but it allowed the plaintiffs to amend their

complaint. The plaintiffs filed a consolidated amended class

action complaint on August 9, 2006, naming only the AmerUs

entities as defendants. The defendants filed a new motion to 2

dismiss. 

The plaintiffs then filed a second amended consolidated
3

class action complaint on March 1, 2007. The defendants

supplemented their motion to dismiss in light of the plaintiffs’

second amended complaint. On August 29, 2007, the Court granted

in part and denied in part the defendants’ motion to dismiss. 

The parties then began their discovery, which lasted

eight months. They produced over 200,000 pages of documents,

including the defendants’ training and sales materials used by

agents who sold the annuities at issue to the plaintiffs. The

plaintiffs deposed 9 of the defendants’ corporate designees and

employees, and the defendants deposed 12 individuals, including

the named plaintiffs. The plaintiffs also exchanged expert

reports of three experts. Pls.’ Unopposed M. for Final Approval

of Settlement, Class Certification, and Award of Attorneys’ Fees

and Costs and Incentive Payments (“Pls.’ M.”) 5-6; See Defs.’ M

for Summ. J. Exs. 1-89; Pls.’ Opp. to Summ. J. Exs. 1-35.

In April 2008, the defendants moved for summary

judgment. The plaintiffs then moved for class certification and

then opposed the defendants’ summary judgment motion. 

On July 16, 2009, the plaintiffs filed their unopposed

motion for preliminary approval of the settlement, certification

of the settlement class, and order directing issuance of notice

to the class. They attached to their motion a third amended

consolidated class action complaint (“complaint”). They also

attached the parties’ stipulation of settlement (“settlement” or
4

“settlement stipulation”) and proposed form of class notice

(“notice”). The Court issued an Order on July 28, 2009,

preliminarily approving the settlement and the notice.

(“preliminary approval order”). 

On October 30, 2009, the plaintiffs submitted their

unopposed motion for final approval of the settlement, class

certification, and award of attorneys’ fees and costs and

incentive payments (“motion for final approval of settlement”). 

They attached eleven declarations and several exhibits to their

motion. The defendants submitted a declaration from Scott J.

Dunn, a Business Systems Analyst from Aviva USA Corporation,

attesting to the systems used to determine the composition of the

class for notice dissemination. The defendants also submitted a

declaration and exhibits from Jason H. Gould, counsel for the

defendants. The declaration attested to the notice sent to

federal and state officials regarding the settlement stipulation,

pursuant to the Class Action Fairness Act, 28 U.S.C. § 1715

(“CAFA”). 

In their complaint, the plaintiffs claim that the

defendants perpetrated a scheme to sell investments to the class

through misrepresentations and omissions about the

characteristics of the investments. They allege that the

defendants targeted and induced the class to buy complex, longterm deferred annuities that lack liquidity. The lengthy
5

surrender periods of the annuities prevent the class members from

obtaining full access to the principal or interest earned on the

annuities without incurring a significant penalty. Many of the

annuities’ surrender periods exceed the actuarial life expectancy

of the class members themselves. Further, upon the investors

death, beneficiaries suffer a loss on the lump sum transfer.

The plaintiffs allege that the defendants perpetrated

their scheme with the help of independent sales agents and

attorneys by: targeting senior citizens and other vulnerable

purchasers, training sales group members to use deceptive

practices and materials when selling the annuities, intentionally

failing to train sales group members to make suitability

determinations, failing to develop a process for making

suitability determinations, and offering high commissions to

sales group members who sold the annuities products.

In the complaint, the plaintiffs assert a violation of

the Federal Racketeer Influenced and Corrupt Organizations Act

(“RICO”), conspiracy to violate RICO, and several related state

law claims.

B. Settlement Negotiations

After the parties conducted months of discovery,

culminating in the plaintiffs’ motion for class certification and

the defendants’ motion for summary judgment, the parties began

settlement negotiations. Hr’g Tr. 13:20-23, Nov. 6, 2009. 
6

To aid in their negotiations, the parties retained

Professor Eric D. Green, a mediator for many complex, multi-party

class action cases, who has authored books on dispute resolution

and worked for thirty years as a professor at Boston University

Law School. The mediation took almost one year and included

approximately ten face-to-face meetings with Professor Green,

numerous telephone calls and conference calls, and dozens of

negotiating sessions in person and via teleconference. The

parties also met frequently without Professor Green to move along

their discussions. According to Professor Green: “The settlement

discussions were protracted, highly contested, but principled,

and entirely at arm’s-length.” The parties reserved discussions

concerning an award of attorneys’ fees and expenses until they

agreed upon the material components of the settlement.

Declaration of Professor Eric D. Green (“Green Decl.”), attached

to Pls.’ M.

C. The Settlement Stipulation

The parties filed their settlement stipulation on July

16, 2009. The settlement stipulation defines the class as:

All persons and entities that purchased

Company Annuities issued during the Class

Period and all persons and entities to which

an ownership interest in such Company

Annuities was subsequently assigned or

transferred, or that otherwise held any

interest as an Owner in such Company
 Excluded from the class are officers, directors, or 3

employees of any defendant; the affiliates, legal

representatives, attorneys, successors, or assigns of any

defendant; any judge, justice, or judicial official presiding

over the action and the staff and immediate family of any such

judge, justice, or judicial official; the claim scorer and the

arbitrator and members of their respective immediate families;

and all persons and entities included in, and who did not exclude

themselves from, the settlement class in the action styled

“Cheves, et al. v. American Investors Life Insurance Company,

Inc., et al.,” Case No. 031024, which action was previously

pending in the Superior Court of the State of California. 

7

Annuities, during the Class Period . . . .3

Settlement II.A.18. The class period is from January 1, 1998, to

July 28, 2009. It includes approximately 387,000 persons and

entities that purchased and/or owned approximately 474,000 of the

defendants’ annuities. Settlement II.A.22; Pls.’ M. 5.

1. Forms of Relief

The parties structured two forms of relief for the

class: general policy relief and claim process relief. General

policy relief includes two versions: basic and enhanced. Under

both basic and enhanced general policy relief, current owners of

eligible annuity policies that are in deferral or in

annuitization may elect to receive the entire amount of their

current account value, plus a specified bonus. They will receive

this payout over a period of between two and seven years,

depending on the length of time they have already held the

annuity. Owners of eligible policies that are categorized as

fully annuitized will receive a lump sum payment. Class members
8

who elect this relief are not subject to surrender charges. 

Settlement IV.

Both basic and enhanced general policy relief also

include for each policy in deferral a benefit equivalent to a 50%

reduction in the amount of surrender charges, if any, that would

otherwise apply under the policy on a death benefit due in the

event of the death of the owner or the annuitant. Settlement

IV.E.

Under basic general policy relief, the bonus for each

policy depends on whether the policy qualifies as a “65-and-Over

Contract.” A 65-and-Over Contract is a contract as to which each

original owner of the contract (or if no such original owner was

a natural person, the annuitant) was 65 years of age or older

when the contract was issued. The bonus for a 65-and-Over

Contract equals 0.40% of the policy’s accumulation value, and the

bonus for all other contracts equals 0.15% of the policy’s

accumulation value. Settlement IV.B-IV.C.

Owners of 65-and-Over Contract policies that are in

deferral, in annuitization, or fully annuitized may elect

enhanced general policy relief by submitting an election form. 

This relief allows the owner to receive a benefit ranging from

0.40% to 2.0%, depending on: (1) whether and the extent to which

the original owner’s remaining life expectancy exceeds the

policy’s surrender charge period, and (2) how large a fraction of
9

the original owner’s liquid net worth was used to purchase the

policy. Settlement IV.C.

As an alternative to basic and enhanced general policy

relief, owners of eligible policies may elect claim process

relief and participate in a claim review process. Under this

process, class members submit a claim form and proof of alleged

misconduct by the defendants or salespersons involved in the

sale. A claim scorer reviews the claim form and materials. The

class members who elect this relief are not subject to crossexamination by the defendants. Depending on the status of the

policy and the score assigned to the corresponding claim, class

members receive payments based on a percentage of surrender

charges, if any, previously incurred by the policy owners, and a

bonus ranging from 0% to 2.25%. Settlement V.

The settlement also includes non-economic relief in the

form of undertakings by the defendants related to the marketing

and sale of annuities and other insurance products offered by

defendants American Investors Life Insurance Company or AmerUs

Life Insurance Company (now known as Aviva Life and Annuity

Company). The defendants agree to disclose, when applicable,

that events organized by the defendants involve sales

presentations. They also agree to not misrepresent their status

or the status of their agents as being investment advisors or

estate planning experts. Further, the defendants will maintain
10

guidelines and procedures for evaluating the suitability of

annuities sold based upon information provided by the purchaser. 

They will also provide information to the purchasers regarding

the characteristics of the annuities, and they will inform and

direct their agents of these undertakings. Settlement III.M.

2. The Release

The settlement includes a release and waiver

(“release”) in exchange for the class members’ relief. The class

members release the defendants from all causes of action, claims,

allegations of liability, damages, restitution, equitable, legal

and administrative relief, interest, demands or rights that were

or could have been asserted in this action. They also release

“other defendants,” defined as those persons and entities that

are named as defendants in the complaints filed in the putative

class actions, but that are not named as defendants in the

complaint. Additionally released are the officers, directors,

employees, representatives, attorneys, and agents of the

defendants and other defendants. Settlement X.

The plaintiffs further agree that they will not

institute, maintain, assert, join, or participate in any action

or proceeding against those released that are based on or related

to the facts alleged in the complaints filed in this action. 
 Defense counsel has already paid the cost of notice to the 4

class. See Hr’g Tr. 62:14-21.

11

3. Attorneys’ Fees and Expenses and Incentive

Payments 

The settlement includes an agreement that the

defendants will not oppose the plaintiffs’ motion for an award of

$17,699,840.50 for attorneys’ fees and $550,159.50 for out-ofpocket expenses, totaling an award of $18,250,000. According to

the plaintiffs’ expert, Dr. William Reichenstein, who holds an

endowed chair in investment management at Baylor University and

who has studied annuities for 20 years, the fee award amounts to

approximately 3% to 9% of the settlement valuation. The

plaintiffs cross-checked their award using the loadstar method

and found it equates to a 2.3 multiplier of the class counsel’s

loadstar amount. Settlement XI.A; Pls.’ M. 60-63.

The settlement also requires the defendants to pay the

uncapped costs of settlement administration, estimated to be $1

million at the time of the plaintiffs’ motion for final approval

of settlement. Settlement XI.C; Pls.’ M. 60. 4

Lastly, the settlement includes an incentive award to

the named plaintiffs in the aggregate amount of $115,000. The

individual awards to the named plaintiffs range from $5000 to

$10,500 each. Settlement XI.D.; Pls.’ M. 74-75.
12

D. Class Notice

Counsel retained Rust Consulting, Inc., a settlement

administrator that specializes in class action notification and

settlement administration (“settlement administrator”), to

facilitate notice of the settlement. Pls.’ M. 11 and Declaration

of Amy L. Lake Regarding Proof of Mailing Notice to Settlement

Class, Establishing a Toll-Free Information Center, and

Establishing a Website ¶¶ 2-3 (“Lake Decl.”) attached to Pls.’ M. 

On August 28, 2009, the settlement administrator

disseminated 387,263 copies of the Court-approved class notice

package to the last known addresses of the class members via

first class, postage pre-paid mail. The class notice described

the action, the applicable terms, and the class’s claims. It

discussed the class members’ right to be heard at the fairness

hearing, their right to exclude themselves from or object to the

settlement, and the procedure to effectuate an exclusion or

objection. It also discussed the binding effect of the

settlement for those who chose not to opt out. The class notice

package included appendices that defined key terms, listed the

policies covered by the settlement, demonstrated the bonus

percentage for enhanced general policy relief, explained the

scoring guidelines for claim process relief, and provided the

various election forms necessary to effectuate specific forms of

relief. Lake Decl. ¶¶ 6-9 and Ex. B.
13

The settlement administrator used an address

verification service to research all mailed class packages that

were returned with no forwarding address. Over 11,000 out of

19,800 class notice packages that were returned as undeliverable

with no forwarding address were successfully remailed. Lake

Decl. ¶¶ 7-12.

The settlement administrator also established a tollfree call center staffed with 50 customer service representatives

who were trained by the parties and the settlement administrator

to answer class members’ questions. The class notice included

the call center’s phone number. The center answered over 41,400

calls from 23,175 class-member callers. Lake Decl. ¶¶ 16-17.

When customer service representatives were unable to

answer class members’ questions, they referred the class members

to class counsel. Class counsel answered hundreds of class

members’ questions. Counsel also helped class members choose a

form of relief, provided the class members’ circumstances, and

helped class members complete any applicable paperwork. Class

counsel told class members to call any time in the future for

advice about the settlement, and class counsel anticipates

receiving such calls in the subsequent months. Declaration of J.

Martin Futrell, Esq. ¶¶ 2-7, attached to Pls.’ M.; Declaration of

Cristina M. Pierson, Esq. ¶¶ 3-9, attached to Pls.’ M.

The settlement administrator also established and
 The settlement administrator also received twenty-nine 5

exclusion requests from non-class members. See Lake Decl. Ex. H.

 James D. Bowman submitted his objection to the Court on 6

November 2, 2009. Although Mr. Bowman did not file a motion for

leave to submit a late objection, the Court will consider his

objection. Robert and Lynne Lisco moved for leave to file a late

14

maintained an internet website containing class notice

information. The site was made available to the public on August

28, 2009, and it contained copies of the settlement, the Court’s

preliminary approval order, the form of escrow agreement, the

class notice and the election and claim forms. The website also

included the settlement administrator’s phone number and answers

to frequently asked questions. As of October 28, 2009, there had

been 13,936 visits to the website. Lake Decl. ¶¶ 13-14.

E. Response to the Settlement

Eight hundred seventy-four class members requested

exclusion from the settlement. Eight hundred thirty-nine sent

their requests by the opt-out deadline. One class member filed a

motion for exclusion after the deadline passed, which the Court

granted. The exclusion rate amounts to 0.2% of the settlement

class. Lake Decl. Exs. F, G. 5

Twelve class members object to the settlement and ten

objection documents were filed. These numbers include three

objectors who filed their objections past the objection

deadline. The twelve objectors amount to 0.003% of the 6
objection. The Court granted the motion on November 19, 2009. 

The Court will not consider the objections from Bruno and Nancy

Leginski. The Leginskis submitted an exclusion with their

objections and are considered excluded class members. As such,

they may not object to the settlement. See Settlement IX.A;

Notice 24. 

15

settlement class. All but three objectors are pro se. Lake

Decl. Ex. E; Letter from James D. Bowman, Class Member, to the

Court (Oct. 29, 2009). 

The substance of the objections involve an array of

complaints. Some objectors request relief specific to their

circumstances or state that the settlement is unfair to the

defendants. Others object to the attorneys’ fee request, and one

objects to the named plaintiffs’ incentive award. Some

objections state that the settlement and notice are overly

complex. One objector protests his inability to both object to

and seek exclusion from the settlement. Several objectors take

issue with specific terms of the settlement stipulation,

including the release of the defendants’ agents, the mechanics of

the claim review process, the size of the benefits, and the

sufficiency of the non-economic relief. Lake Decl. Ex. E.

Having received notice of the settlement stipulation,

pursuant to CAFA, the Attorney General of Pennsylvania and the

Attorney General of Texas on behalf of the Texas Department of

Insurance filed amicus briefs in opposition to the settlement. 

Both attorneys general argue, first, that the release improperly
 Two attorneys filed a notice to appear on behalf of three 7

objectors, Martha Michael and Lynne and Robert Lisco. No

objectors sought appearance otherwise. Counsel for Ms. Michael

subsequently withdrew the notice of appearance. Counsel for the

Liscos did not appear. Attorney Gary Lightman appeared on behalf

of his clients, individual plaintiffs who opted out of the

settlement.

16

prohibits, or at least chills, class members from participating,

as witnesses or otherwise, in regulatory actions brought by the

attorneys general. They argue that this limit on participation

handicaps the states’ abilities to enforce their laws. They

argue, second, that the release improperly attempts to limit the

claims and relief of pending or future regulatory actions brought

by the attorneys general against the releasees. The Texas

Attorney General additionally argues that the claim review

process provides inadequate relief. 

F. The Fairness Hearing

The Court held a fairness hearing on November 6, 2009.

Counsel for both the plaintiffs and the defendants appeared at

the fairness hearing and spoke on behalf of their clients. No

attorneys or objectors made an appearance.7

Attorney John Abel, counsel on behalf of the

Pennsylvania Attorney General’s Office, appeared and explained

the attorney general’s views regarding class member participation

in state regulatory actions and the release’s impact on claims

and relief in pending and future state regulatory actions. Hr’g
17

Tr. 7:24-8:5, 33:4-57:8. 

With regard to the participation concerns, counsel for

the plaintiffs and the defendants and Attorney Abel presented the

Court with an amended release to address this issue. The

amendment, which the attorneys requested to be attached to the

end of two specified paragraphs of the release, states:

Nothing in this Order shall be construed to

impede, impinge, impair or prevent in any

fashion any Named Plaintiff and/or Class

Member from responding to, cooperating in or

communicating with any state, federal or

local government body or official or any

attorney representing a private party,

including, without limitation, appearance as

a witness for testimony or the production of

information. 

Hr’g Tr. 58:18-25.

With regard to the release’s impact on claims and

relief in pending and future regulatory actions, the plaintiffs’

counsel argued that the release extends only to the claims the

plaintiffs have, and it does not release claims held by the

attorneys general. Additionally, the plaintiffs’ counsel and the

defendants’ counsel argued, and Attorney Abel agreed, that this

action was not the appropriate forum to determine whether the

release forecloses any particular claim or remedy. 

II. Analysis

The Court first addresses the issue of class

certification for the settlement class and the notice sent to the
18

class members. The Court then analyzes the fairness of the

settlement and the proposed attorneys’ fees, costs, and payments

to the named plaintiffs.

A. Class Certification

When presented with an unopposed motion for class

certification and settlement approval, a court must separate its

analysis of the class certification issue from its evaluation of

the settlement’s fairness. See In re Ins. Brokerage Antitrust

Litig., 579 F.3d 241, 257 (3d Cir. 2009). To certify a class

under Federal Rule of Civil Procedure Rule 23, a court must find

that the action satisfies all four requirements of Rule 23(a) and

that the action is maintainable under Rule 23(b)(1), (2), or (3). 

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997).

The settlement class in this case includes all persons

and entities that purchased company annuities issued during the

class period and all persons and entities to which an ownership

interest in such annuities was subsequently assigned or

transferred, or that otherwise held any interests as an owner in

such company annuities, during the class period. The class

period commences on January 1, 1998, and it extends to and

includes July 28, 2009. 

1. Analysis Under Rule 23(a)

Rule 23(a) sets forth four requirements for class
19

certification: numerosity, commonality, typicality, and adequacy

of representation. See Amchem Prods., 521 U.S. at 613. The

Court finds that the class meets these four requirements.

a. Numerosity

Rule 23(a)(1) requires a finding that the class is so

numerous that joinder of all class members is impracticable.

Although there is no precise number for establishing numerosity,

classes that exceed forty or more class members generally satisfy

this prerequisite. See Stewart v. Abraham, 275 F.3d 220, 226-27

(3d Cir. 2001). The settlement class in this action consists of

approximately 387,000 individuals. Because joinder of these

individuals is impracticable, the plaintiffs satisfy the

numerosity requirement.

b. Commonality

Rule 23(a)(2) requires that there be questions of law

or fact common to the class. If class members share at least one

question of law or fact in common, factual differences among the

class members’ claims do not defeat certification. In re

Prudential Ins. Co. of Am. Sales Practice Litig. Agent Actions

(“Prudential II”), 148 F.3d 283, 309-10 (3d Cir. 1998).

In this action, questions of law and fact necessary to

prove the plaintiffs’ RICO and state law claims are common to the

class and satisfy the commonality requirement. For example, the
20

plaintiffs would need to establish whether the defendants

developed, used, and taught deceptive practices to the sales

agents and whether the defendants created or approved deceptive

materials to be distributed to all purchasers.

c. Typicality

Rule 23(a)(3) requires that the claims or defenses of

the representative parties be typical of the claims or defenses

of the class. The typicality requirement ensures that the class

representatives’ interests are aligned with those of the absent

class members, so that the representatives work to benefit the

class as a whole. Prudential II, 148 F.3d at 311. When the

representatives’ claims and those of the absent class members

arise from the same course of conduct and are based on the same

legal theories, the class satisfies typicality, irrespective of

factual differences underlying the individual claims. Baby Neal

v. Casey, 43 F.3d 48, 57-58 (3d Cir. 1994). 

In this action, all of the plaintiffs’ claims arise

from the same allegation that the defendants engaged in a scheme

to sell long-term deferred annuities to purchasers by using

fraudulent misrepresentations. Because this matter challenges

the defendants’ uniform course of conduct as it affects the

entire class, the class satisfies typicality.
21

d. Adequacy of Representation

Rule 24(a)(4) requires a court to find that the

representative parties will fairly and adequately protect the

interests of the class. The representation inquiry is a twopronged analysis, testing the qualifications of counsel to

represent the class and determining whether any conflicts of

interest exist between the class representatives and the absent

class members. See Prudential II, 148 F.3d at 312. The adequacy

of representation requirement tends to merge with the commonality

and typicality criteria of Rule 23(a). Amchem, 521 U.S. at 626

n.20.

In regard to the qualifications of counsel, the Court

finds that the plaintiffs’ counsel is experienced and able to

conduct the litigation on behalf of the class. Lead Attorneys

Marcus, Auerbach, and Hargrove each have extensive experience in

prosecuting class actions and complex litigations. Mr. Marcus

and Mr. Auerbach have served as lead counsel in several consumer

class actions, including class actions involving insurance

products. Additionally, Mr. Hargrove prosecuted the first class

action certified in any court that addressed equity-indexed

annuity products. See Declaration of Jonathan Auerbach, Esq. 

Ex. 1 (“Auerbach Decl.”), attached to Pls.’ M.; Declaration of

John R. Hargrove, Esq. ¶¶ 3-5 (“Hargrove Decl.”), attached to

Pls.’ M.
22

In regard to conflicts of interest between the class

representatives and the absent class members, the Court finds no

conflicts that defeat certification. The crux of this class

action centers on the allegation that the defendants engaged in a

scheme to defraud policyholders. Both the named plaintiffs and

the absent class members have claims that arise from the same

course of conduct by the defendants and they seek the same

remedies. 

2. Analysis Under Rule 23(b)

After a court determines that an action meets the

requirements of Rule 23(a), it must consider whether the action

is maintainable under one of the three parts of Rule 23(b). The

plaintiffs seek to have this class certified under Rule 23(b)(3).

Rule 23(b)(3) requires the court to find that questions

of law or fact common to class members predominate over any

questions affecting only individual members and that a class

action is superior to other available methods for fairly and

efficiently adjudicating the controversy. The Rule provides a

non-exhaustive list of factors to aid the court in its

determination: (1) the class members’ interests in individually

controlling the prosecution or defense of separate actions, (2)

the extent and nature of any litigation concerning the

controversy already begun by or against class members, (3) the
23

desirability or undesirability of concentrating the litigation of

the claims in the particular forum, and (4) the likely

difficulties in managing a class action. A district court need

not inquire into the fourth factor when evaluating a settlementonly class certification. See Amchem, 521 U.S. at 620.

a. Predominance

Under the predominance requirement, a court must

determine that common questions of law or fact predominate over

any questions affecting only individual members. This

requirement is more stringent than the commonality requirement of

Rule 23(a). In re Ins. Brokerage Antitrust Litig., 579 F.3d at

266. To establish predominance, the plaintiffs must show by a

preponderance of the evidence that the elements of their claim

can be proven by evidence common to all in their class. See In

re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311-12, 320

(3d Cir. 2008).

Courts have found that cases alleging a common scheme

of deception through the use of uniform misrepresentations and

omissions satisfy the predominance requirement. See Prudential

II, 148 F.3d at 314-15 (affirming finding of predominance for

fraud allegation based in part on defendant’s uniform sales

materials containing statements at issue); Iorio v. Asset Mktg.

Inc., No. 05CV633 IEG (CAB), 2006 U.S. Dist. LEXIS 94948 (S.D.
24

Cal. July 26, 2006) (finding predominance for fraud allegation

based on defendant’s uniform written materials that contained

alleged misrepresentations); Negrete v. Allianz Life Ins. Co. of

N. Am., 238 F.R.D. 482, 491-92 (C.D. Cal. 2006) (finding

predominance for RICO claim based on uniform written marketing

materials and plaintiffs allegations of fraud). Individual

questions as to each investor’s reliance on the

misrepresentations do not prevent a finding of predominance. 

Prudential II, 148 F.3d at 315. 

In this action, the plaintiffs allege that the

defendants engaged in a common scheme to defraud the class

members into purchasing long-term deferred annuities through

uniform misrepresentations and omissions regarding the annuities

products. The plaintiffs provide evidence that the defendants:

(1) required all agents to represent that the annuities were

suitable for the purchasers, (2) required all agents to use the

defendants’ package of materials in every sale and to provide the

package to every purchaser, and (3) required that all marketing

documents relating to AmerUs products be drafted or approved by

the defendants. This evidence consists of uniform written

materials that contain the alleged misrepresentations and

omissions, and it is common to all in the class for proving the

various fraud allegations. Based on the plaintiffs’ allegations

and the record before the Court, the plaintiffs meet the
 For example, Mr. and Mrs. Stein invested approximately 8

$20,000 in their deferred annuity. Mary Lynch invested $65,000

of her $75,000 in life savings in her deferred annuity. Mr. and

Mrs. Price invested approximately $61,000 in two separate

deferred annuities. Dr. Healy invested approximately $107,000 in

his deferred annuity. Ms. Ryles invested approximately $80,000

in her deferred annuities. Ms. Edwards invested approximately

$27,000 in her deferred annuities. Complaint ¶¶ 105, 125, 148,

147, 174, 200. 

25

predominance requirement for class certification. See Pls.’

Factual M. in Support of M. for Class Certification and in Opp.

to Defs.’ M. for Summ. J. 21-22 and Exs. 19, 22, 24, 28, 30, 34

(“M. for Certif.”). 

b. Superiority

Under the superiority requirement, the court determines

whether a class action, rather than individual litigation, is the

best method for achieving a fair and efficient adjudication. See

Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d

154, 190 (3d Cir. 2001). 

A class action in this case is superior to other

methods of litigation. First, class members are likely to lack

the financial incentive to litigate their suits individually

because most, if not all, of the class members’ claims are modest

in light of the costs of litigation. See In re Prudential Ins. 8

Co. of Am. Sales Practice Litig. Agent Actions (“Prudential I”),

962 F. Supp. 450, 522-23 (D.N.J. 1997), affirmed, 148 F.3d at

315-16. Second, class adjudication saves time, effort and the
26

expense of litigating the claims of approximately 387,000 class

members. Third, there have been few individual suits on behalf

of class members in light of the hundreds of thousands of

claimants.

Finding that the requirements of Rule 23(a) and Rule

23(b)(3) are met, the Court hereby certifies the class as

presented by the plaintiffs and unopposed by the defendants. 

B. Class Notice

Under Rule 23(c)(2)(B), notice must be given to

potential class members by the best notice practicable under the

circumstances for all classes certified under Rule 23(b)(3). 

This includes individual notice to all potential class members

that can be identified through reasonable effort. Notice must

state in clear, concise and plain language: (1) the nature of the

action; (2) the definition of the class certified; (3) the class

claims, issues or defenses; (4) the class member’s right to enter

an appearance by an attorney; (5) the class member’s right to be

excluded from the class; (6) the time and manner for requesting

exclusion; and (7) the binding effect of settlement on class

members. Fed. R. Civ. P. 23(c)(2)(B). A court must determine

that notice was appropriate before evaluating the merits of the

settlement itself. See e.g., Prudential II, 148 F.3d at 326-27.

Two objectors, James D. Bowman and Martha Michael,
27

object to the settlement on the grounds that the notice was

overly complex. Mr. Bowman argues that the notice was too

complicated for class members to elect the relief they wanted

without professional help. Ms. Michael argues that the notice

was too long and written in too small of a font, the description

of the relief was confusing, and the term “releasees,” as used in

the notice, required a burdensome cross-reference to the

settlement itself.

The Court finds these objections unpersuasive and holds

that the notice to the class members met the requirements of Rule

23(c)(2)(B). The settlement administrator sent individual notice

packages to 387,263 individuals, and of the 19,800 packages that

were returned as undeliverable, 11,000 were successfully

remailed. The notice was written in simple English and was

readily understandable by the class, as demonstrated by the small

number of objectors. It described the action, the applicable

terms, and the class’s claims. It discussed the class members’

right to be heard at the fairness hearing through appearance by

counsel or otherwise, their right to exclude themselves from or

object to the settlement, and the procedure to effectuate an

exclusion or objection. It also discussed the binding effect of

the settlement for those who chose not to opt out.

The notice was no more complicated than necessary for

the class members to understand a complex settlement that settles
28

the complex litigation. The length of the notice, totaling

eighteen pages of content and ten pages of appendices, and

including the two election forms for enhanced general policy

relief and claim process relief, was necessary to provide class

members with the information they needed to understand the

settlement and the forms they needed to elect specific relief. 

It included a summary, a table of contents, and detailed answers

that explained the facets of the settlement. The appendices

provided definitions of key terms, a review of the claim scoring

process, and a table demonstrating the bonus percentages. Class

members with questions could seek more information on the

settlement website, which featured answers to frequently asked

questions, relevant documents, and printable versions of the two

election forms. Class members could also speak with customer

service representatives and class counsel if they had further

questions.
 The Court has jurisdiction to rule on the settlement. The 9

Court has federal question subject matter jurisdiction over the

plaintiffs’ two RICO claims. See 18 U.S.C. § 1964. The Court

has supplemental jurisdiction over the plaintiffs’ state law

claims because the claims are part of the same case or

controversy as the RICO claims. See 28 U.S.C. § 1367. The Court

has personal jurisdiction over the plaintiffs and the absent

class members based on the notice provided to all class members,

which informed them of the nature of the litigation, their

opportunity to be heard and their opportunity to withdraw from

the class. See Prudential II, 148 F.3d at 306 (citing Phillips

Petroleum v. Shutts, 472 U.S. 767, 811-12 (1985)).

29

C. Approval of the Settlement9

The plaintiffs explain that their decision to settle is

based upon consideration of: (1) the fairness, reasonableness and

adequacy of the settlement stipulation; (2) the substantial risks

and uncertainties of protracted litigation and trial, especially

in complex actions such as this, as well as the difficulties,

delays and risks of adverse results inherent in such litigation;

(3) the needs and interests of the class members; and (4) the

desirability of consummating the settlement stipulation promptly,

in order to provide effective relief to the class members. Pls.’

M. 6-7.

Pursuant to Federal Rule of Civil Procedure Rule 23(e),

in order for a court to approve a class settlement, it must find

that the settlement is fair, reasonable and adequate. See In re

Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55

F.3d 768, 785 (3d Cir. 1995). When considering a class

settlement, the “court plays the important role of protector of
30

the [absent class members’] interests, in a sort of fiduciary

capacity.” Id. at 784.

In Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975), the

Court of Appeals for the Third Circuit established the following

nine factors that a district court should consider to determine

whether a settlement is fair, reasonable and adequate: (1) the

complexity, expense and likely duration of the litigation; (2)

the reaction of the class to the settlement; (3) the stage of the

proceedings and the amount of discovery completed; (4) the risks

of establishing liability; (5) the risks of establishing damages;

(6) the risks of maintaining the class through the trial; (7) the

ability of the defendants to withstand a greater settlement; (8)

the range of reasonableness of the settlement fund in light of

the best possible recovery; and (9) the range of reasonableness

of the settlement fund in light of the attendant risks of

litigation. Id. at 157.

A preliminary approval of the settlement establishes an

initial presumption of fairness when the court finds: (1) the

negotiations occurred at arm’s length, (2) there was sufficient

discovery, (3) the proponents of the settlement are experienced

in similar litigation, and (4) only a small fraction of the class

objected. In re Gen. Motors, 55 F.3d at 785.

The Court finds an initial presumption of fairness for

the settlement. Further, in applying the Girsh factors, the
31

Court is satisfied that the settlement is fair, reasonable and

adequate to the class members.

1. Initial Presumption of Fairness

The Court preliminarily approved the settlement on July

28, 2009, and it finds that there is an initial presumption of

fairness because the settlement meets all four of the factors

that create the presumption. First, the settlement negotiations

occurred at arm’s length. The parties reached the settlement

stipulation after protracted negotiations over the course of one

year. The negotiations encompassed several rounds of mediation

with Professor Green, who is extremely experienced in mediating

large, complex cases such as this one. The parties also talked

without Professor Green, in order to move along their

discussions. 

Second, the parties conducted sufficient discovery. 

Class counsel reviewed hundreds of thousands of pages of

documents and took nine depositions of corporate designees and

employees. They retained three experts and attached thirty-five

exhibits to support their motion for class certification and

their opposition to the defendants’ motion for summary judgment.

Third, the plaintiffs’ counsel is extremely experienced

in matters similar to the one at hand. The attorneys have served

as lead counsel in numerous class actions on behalf of insureds
32

and other parties against insurance companies and have previously

litigated long-term annuities suits.

Fourth, a very small fraction of the class has objected

to the settlement. Notice was sent to 387,263 potential class

members. Of those, only 12 objected. The percentage of

objectors is only 0.003% of the entire class. 

2. The Girsh Factors

Having established a presumption of fairness for the

settlement, the Court turns to the Girsh factors and finds that

they weigh in favor of settlement approval. 

a. The Complexity, Expense and Likely Duration

of the Litigation 

The first Girsh factor, the complexity, expense, and

likely duration of the litigation, weighs in favor of the Court

finding that the settlement stipulation is fair, reasonable and

adequate. The action involves numerous complex legal questions

and defenses. If the case were to proceed in litigation, it

would require an enormous outlay of time, money and energy from

all of the parties, above and beyond the amount that they have

expended in the five years that this action has been pending. 

The plaintiffs’ RICO claims add to the complexity of this already

complicated case because of the novel issues they present. The

settlement avoids all of the costly uncertainty discussed above,
33

and instead, provides class members with certain, timely relief. 

b. The Reaction of the Class to the Settlement

The second factor, the reaction of the class, also

favors approval of the settlement. The number of class members

who sought exclusion or who object to the settlement stipulation

demonstrates class-wide approval of the settlement. The

substance of the objections also fails to present an obstacle to

final approval. Further, the Court finds the states attorneys’

general arguments for rejecting the settlement to be

unpersuasive.

(1) Objections and Exclusions

The low percentage of objections and exclusions to the

settlement stipulation demonstrates class support for the

settlement. Only 12 out of 387,263 class members object to the

settlement and only 840 were excluded. 

The disparity between the number of potential class

members and the number of objectors creates a strong presumption

in favor of the settlement. In re Cendant Corp. Litig., 264 F.3d

201, 235 (3d Cir. 2001). Here, the disparity between the

objectors and the potential class is great: only 0.003% of the

settlement class objected. 

The 840 exclusions amount to only 0.2% of the class,

also demonstrating the class’s approval of the settlement. The
 See e.g., Varacallo v. Mass. Mut. Life Ins. Co., 226 10

F.R.D. 207, 237 (D.N.J. 2005) (approving settlement with 0.06%

exclusions and 0.003% objections in insurance fraud class

action); In re Metro. Life Ins. Co. Sales Practices Litig., Misc.

Docket No. 96-179, MDL No. 1091, 1999 U.S. Dist. LEXIS 22688, at

*79-80 (W.D. Pa. Dec. 28, 1999) (approving settlement with 0.33%

exclusions and 0.003% objections in annuities’ fraud class

action); Prudential I, 962 F. Supp. at 537 (approving settlement

with 0.2% exclusions and 0.003% objections in insurance fraud

class action).

34

Court of Appeals for the Third Circuit previously affirmed a

district court’s finding that 0.2% of exclusions weighs in favor

of settlement approval. Prudential II, 148 F.3d at 318. 

Further, the percentages of the objections and exclusions in this

action are similar to or lower than other approved class action

settlements for cases alleging fraudulent investment sales

practices.10

In light of the investigations class members made into

the settlement, the low numbers of objections and exclusions

demonstrate the class’s affirmative endorsement of the

settlement. Approximately 23,175 class members called the tollfree telephone number for information about the settlement, and

yet only 12 class members object and only 840 were excluded.

Upon consideration of the substance of the objections,

the issues raised by the objectors do not present an obstacle to

final approval of the settlement.
 Mr. Seikel also objects because class members cannot both 11

exclude themselves from the settlement and object to it. The

Court overrules this objection. Courts routinely approve

settlements with such limitations. See e.g., Olden v. Gardner,

294 Fed. Appx. 210, 216 (6th Cir. 2008); Elkins v. Equitable Life

Ins. Co., Civil Action No. 96-296-CIV-T-17B, 1998 U.S. Dist.

LEXIS 1557, at *16 (M.D. Fla. Jan. 28, 1998). 

35

Four of the twelve objectors, Robert E. Seikel,11

Dallas J. Raby, Phillis A. Raby, and Michael Gopoian, object to

the settlement for personal reasons. Mr. Seikel and Mr. and Mrs.

Raby object because they did not experience any wrongdoing by the

defendants. Mr. Gopoian objects because he wants to recover $430

from a charge on his account. These four personal complaints do

not upset the settlement’s fairness to the class as a whole. See

Elkins v. Equitable Life Ins. Co., Civil Action No. 96-296-CIV-T17B, 1998 U.S. Dist. LEXIS 1557, at *90-91 (M.D. Fla. Jan 28,

1998).

Two objectors to the settlement, David D. Dalquist and

Jonathan Upchurch on behalf of Edith M. Newcomer, object based on

a misunderstanding of the settlement terms, and therefore their

objections do not affect the settlement’s fairness. Mr. Dalquist

protests the inability to transfer his funds to another provider

via a non-taxable transfer, and Mr. Upchurch protests the lack of

benefits for death benefits contracts. Because both forms of

relief sought by the objectors are available under the settlement

stipulation, the objections lack merit.
 Ms. Michael objects further on the grounds that the non- 12

economic relief is insufficient because it lacks monitoring and

enforcement provisions, and the claim review process calls into

question the predominance and superiority requirements under Rule

23(b)(3). She also argues that the settlement is unfair because

the bonuses will be funded at the expense of class members

through internal manipulations of the annuities’ interest rates. 

 The Court overrules these objections. First, the Court

finds the non-economic relief fair and notes that, during the

pendency of this action, the Securities and Exchange Commission

issued a rule changing the way and by whom these products can be

sold. Second, as stated above, the Court finds that this class

meets the requirements for class certification. Third, the terms

of the settlement expressly prohibit the internal manipulations

that Ms. Michael fears. The plaintiffs’ interest rate is the

greater of three terms: two percent, the company’s market rate at

the time the payments are made, and the rate that is in the

policy. See Notice 17; Hr’g Tr. 27:17-18:8, 53:12-54:20. 

36

Four objectors find the settlement’s relief

insufficient. James D. Bowman argues that the claim review

process is unfair because the defendants choose the claim scorers

and the class members must prove, without knowing the law, that

the defendants engaged in misconduct. Ms. Michael objects to the

claim review process because, unlike a settlement reached between

the Minnesota Attorney General and the defendants, the relief in

this settlement stipulation does not include rescission and a

full refund of the class members’ investments. Ms. Michael also

finds the release of the defendants’ agents to be overly broad

and without consideration. Robert and Lynne Lisco, through 12

their attorney, object to the relief, finding the value “meager”

compared to possible relief available under Illinois state
 Robert and Lynne Lisco also object to the fact that they 13

did not receive the aggregate value of the settlement until

November 2, 2009, when they reviewed the plaintiffs’ motion for

final approval of settlement, which included the expert’s

calculation. The Court overrules this objection. The Liscos do

not explain why they object to the date of the release of the

settlement’s aggregate value, nor how the date of the release

harmed them.

37

statutes. They urge the Court to reject the settlement for class

members from Illinois above the age of 60.13

The Court finds these objections unpersuasive. First,

the claim review process is only one form of relief afforded to

class members in the settlement. Unlike the Minnesota settlement

agreement, reached for a class comprising 0.9% of this settlement

class and which solely affords a claim review process, class

members have the option of the claim review process or general

policy relief. Class members thus need not prove that the

defendants engaged in misconduct in order to receive benefits,

and therefore their relief options are broader than those

provided under the Minnesota agreement. See Pls.’ M. 31; Hr’g

Tr. 26:2-32:20.

Second, the release of agents is a necessary component

of the settlement agreement in order to provide finality. 

Otherwise, dissatisfied policyholders could sue the defendants’

agents who would then, in turn, look to the defendants for

indemnity or contribution. Prudential I, 962 F. Supp. at 559;

See Prudential II, 148 F.3d at 326 (affirming release of all
 Five objectors, two of whom object on no other grounds, 14

object to the settlement’s proposed attorneys’ fees. These

objectors’ arguments are addressed in the attorneys’ fees section

of the Memorandum.

38

claims that arise out of the same conduct as alleged in the

complaint).14

(2) Amicus Briefs from the Pennsylvania and

Texas Attorneys General 

The attorneys general from Pennsylvania and Texas

submitted amicus briefs to the Court in opposition to the

settlement stipulation. Both attorneys general argue that the

settlement stipulation release is excessively broad because it

prohibits class members from participating, as witnesses or

otherwise, in regulatory actions against the releasees. They

argue further that the release improperly attempts to foreclose

parens patriae claims and restitution to class members as a form

of relief that the attorneys general might seek in their own

litigation against the defendants. Penn. Br. 5-7; Tex. Br. 9-11.

Attorney Abel and counsel for the plaintiffs and

defendants worked together at the fairness hearing to address the

attorneys’ general participation concerns. They requested that

the Court amend the release to explicitly allow class members to

respond to, cooperate in and communicate with regulatory bodies

investigating the defendants’ behavior. The Court approves the

amendment to the release and adopts it into its Final Order.
39

In terms of foreclosed claims or relief, the issue of

whether a parens patriae claim or restitution remedy may be

foreclosed because of the release is not currently before the

Court. The defendants in this action are entitled to a release

of all claims held by class members in exchange for providing the

relief outlined in the settlement. The attorneys’ general law

enforcement powers are not claims the plaintiffs have, and as

such, the plaintiffs do not release any of these claims. 

In addition to the concerns about the release, the

Texas Attorney General argues that the relief available under the

claim review process is inadequate. The attorney general argues

that class members seeking this relief who receive the two

highest possible scores by demonstrating fraud should recoup a

full refund of surrender charges.

The Court disagrees. Although the claim review process

does not provide the opportunity to receive a full refund of

surrender charges, it does provide significant concessions that

benefit class members. The defendants cannot cross examine the

class members who elect this form of relief in order to undercut

the class members’ allegations. 

The Court must consider whether the relief provided in

the settlement stipulation, taken as a whole, is fair, adequate

and reasonable to the class members. Upon consideration of the

class’s reaction to the proposed settlement stipulation, and in
40

light of the attorneys’ general arguments, the Court finds that

the reaction of the class to the settlement weighs in favor of

final approval. 

c. The Stage of the Proceedings and the Amount

of Discovery Completed 

The third factor, the stage of the proceedings and the

amount of discovery, similarly weighs toward acceptance of the

settlement. Post-discovery settlements are more likely to

reflect the true value of the claim. Bell Atl. Corp. v. Bolger,

2 F.3d 1304, 1314 (3d Cir. 1993). 

Here, the settlement was achieved after years of

litigation. The Court has considered motions to dismiss and

numerous other pretrial disputes. The parties have produced more

than 200,000 documents, taken 21 depositions, and retained

several experts. The parties briefed motions for summary

judgment and class certification. The current docket includes

459 docket entries, 421 of which preceded the proposed

settlement. This background proves that the parties had a

tremendous “appreciation of the merits of the case before

negotiating.” In re Gen. Motors, 55 F.3d at 813.

d. The Risks of Establishing Liability and

Damages 

The fourth and fifth factors, the risks of establishing

liability and the risks of establishing damages, weigh in favor
41

of settlement. As to liability, first, the plaintiffs have

already faced significant challenges by bringing civil RICO

claims, which the Court dismissed once and which present

complexities. See McCarter v. Mitcham, 883 F.2d 196, 208 (3d

Cir. 1989) (Sloviter, J., dissenting in part, concurring in

part). 

Second, the defendants filed a comprehensive motion for

summary judgment. The motion challenges the plaintiffs’ ability

to bring their RICO and state law claims, and it also argues that

the RICO claims are preempted by the McCarren-Ferguson Act and

barred by the filed rate doctrine. These arguments raise

difficult issues, the outcome of which is uncertain.

Third, even if this action survived summary judgment,

the trial would be complex and risky. It would involve intricate

actuarial and financial analysis of the defendants’ annuities and

an inevitable battle of the experts. See Prudential I, 962 F.

Supp. at 539 (noting the risks of establishing liability because

of opposing expert witnesses).

As to damages, the plaintiffs would struggle to prove a

damage amount. The plaintiffs allege that the defendants

misrepresented the character of the annuities during the sales of

the policies. These allegations do not lend themselves to

straightforward damage calculations, and the plaintiffs may have
42

difficulty proving a monetary figure based on this harm.

e. The Risks of Maintaining the Class Through

Trial 

The sixth Girsh factor, the risk of maintaining the

class action through trial, is a neutral issue in this case. 

There is always some risk of decertification in any class action. 

f. The Ability of the Defendants to Withstand a

Greater Settlement 

 The seventh Girsh factor, the ability of the

defendants to withstand a greater judgment, is also neutral. The

plaintiffs’ expert Dr. Reichenstein valued the settlement to

range from approximately $185,250,000 to $549,250,000, including

the sought attorneys’ fees, expenses, and costs of settlement

administration, all of which the defendants are to pay. There is

no reason to think that the defendants, comprising major

corporations, would be unable to withstand a greater judgment. 

g. The Reasonableness of the Settlement in Light

of the Best Possible Recovery and the

Attendant Risks of Litigation 

The eighth and ninth Girsh factors, the reasonableness

of the settlement in light of the best possible recovery and the

attendant risks of litigation, support approval of the

settlement. The thrust of the plaintiffs allegations is that the
 See Strube v. Am. Equity Life Ins. Co., Case No. 15

6:01-cv-1236-Orl-19DAB, 2006 U.S. Dist. LEXIS 28582 at *7 (M.D.

Fla. May 5, 2006) (noting approved settlement offering election

of immediate 2% annuitization bonus to annuity values or a claim

review process); Grove v. Principal Mut. Life Ins. Co., 200

F.R.D. 434, 437-38 (S.D. Iowa 2001) (approving settlement

comprising death benefits in the form of free term life insurance

or claim review process); Snell v. Allianz Life Ins. Co. of N.

Am., Civ. No. 97-2784 (RLE), 2000 U.S. Dist. LEXIS 13611 (D.

Minn. Sept. 8, 2000) (approving settlement comprising election of

benefits and bonuses based on policies or a claim review

process). 

43

defendants products are illiquid. The settlement relief

liquifies the annuities and allows class members to receive

immediate payments and bonuses. Class members who can establish

fraud can receive even greater relief. The reasonableness of the

settlement is reinforced by the fact that annuities are

inherently illiquid products. By nature, they are long-term

investments that provide long-term payouts. Further, the

settlement is commensurate with other cases involving annuity

sales practices. 

15

 Dr. Reichenstein, who has studied annuities for more

than two decades, estimates that the total settlement relief

ranges between $166 million to $530 million. Class counsel

believe that the settlement value will surpass the low estimation

because, by the time of the fairness hearing, class participation

was already higher than what Dr. Reichenstein had anticipated
 The nonmonetary relief also adds to the settlement’s 16

fairness. It prevents the defendants from engaging in the alleged

sales practices in the future by requiring the defendants to

undertake changes in the marketing and sales of annuities and

other insurance products.

44

when calculating the low figure. Hr’g Tr. 67:20-68:4. 16

After finding a presumption of fairness for the

settlement and applying the Girsh factors, the Court concludes

that the settlement is fair, reasonable and adequate under Rule

23(e). All but two of the Girsh factors weigh in favor of

approving the settlement. The two factors that do not weigh in

favor are merely neutral. For these reasons, the Court approves

the settlement under 23(e).

C. Attorneys Fees and Expenses

Class counsel in a class action who recovers a common

fund for the benefit of persons other than himself or his client

is entitled to a fair and reasonable award of attorneys’ fees

from the fund as a whole. Boeing Co. v. Van Gemert, 444 U.S.

472, 478 (1980). The Court of Appeals for the Third Circuit

favors the percentage-of-recovery method for fee calculation in

common fund cases. Prudential II, 148 F.3d at 333. It also

approves a district court’s use of this method when evaluating

settlements that involve an uncapped valuation dependent upon the

relief class members seek. Id. Class counsel in this action
 The fee award does not include the costs of settlement 17

administration, of which, as stated above, the defendants have

agreed to pay. 

45

used the percentage-of-recovery method to calculate the proposed

fee award. It also used the lodestar method, the alternative

method of fee calculation, as a cross-check to ensure that the

fee amount is reasonable. See In re Ins. Brokerage Antitrust

Litig., 579 F.3d at 280.

As a result of these calculations and the calculations

of Dr. Reichenstein, class counsel seeks an award of attorneys’

fees between 3% and 9% of the settlement valuation, based on the

estimated high and low of the settlement total. This fee award

amounts to $17,699,840.50. Class counsel also requests

$550,159.50 for reimbursement of its out-of-pocket expenses. 

17

The Court finds that the attorneys’ fees and expenses

request is reasonable, and it grants class counsel’s request.

1. The Reasonableness of the Fees

The Court of Appeals for the Third Circuit requires

district courts to consider seven factors when determining the

reasonableness of a fee calculated via the percentage-of-recovery

method. Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir.

2000). They are: (1) the size of the fund created and number of

persons benefitted, (2) the presence or absence of substantial
46

objections by members of the class to the settlement terms and/or

fees requested by counsel, (3) the skill and efficiency of the

attorneys involved, (4) the complexity and duration of the

litigation, (5) the risk of nonpayment, (6) the amount of time

devoted to the case by the plaintiffs’ counsel, and (7) the

awards in similar cases. Id. at 195 n.1. All factors weigh in

favor of approving the attorneys’ fee petition in this case.

The fourth factor, the complexity and duration of the

litigation, is the first a district court can and should consider

when awarding fees. Id. at 197. This factor weighs in favor of

class counsel’s fee request. The plaintiffs’ case involves

complex legal issues including alleged violations of RICO and a

conspiracy to violate RICO, along with various state law claims. 

The litigation has been pending for more than five years, and

class counsel has conducted extensive discovery, having reviewed

hundreds of thousands of documents and conducted numerous

depositions of the defendants’ agents and corporate designees. 

Class counsel has also retained experts to analyze the

defendants’ annuity products, and it has filed several complex

motions and defended against several such motions.

The first factor, the size of the fund created and the

number of persons benefitted, also favors the fee award. Here,

as calculated by Dr. Reichenstein, the proposed settlement value
47

is between $185,250,000 and $549,250,000, a value that includes

class counsel’s requested attorneys’ fees and expenses and the

costs of settlement administration. The attorneys’ fee request

of $17,699,840.50 equates to 3% to 9% of the value of the

proposed settlement. This settlement award benefits over 387,000

individuals across the nation and serves approximately 474,000

policies.

The second factor, the number of substantial

objections, also weighs in class counsel’s favor. First, only

five class members, Mr. Seikel, Mr. Bowman, Ms. Michael, Joseph

A. Diggle and Douglas B. Young, object to the attorneys’ fee

request, stating that the request is too high and will affect the

plaintiffs’ dividends. The small number of objectors weighs in

favor of fee approval, particularly because the section in the

notice that described the sought attorneys fees was directly

above the section that advised class members how to object to the

settlement.

Second, the objectors do not substantiate their

objections. None of the objectors presents evidence that the

attorneys’ award would affect the plaintiffs’ dividends. See

Prudential II, 148 F.3d at 336. Professor Green, who mediated

the settlement, attested that the parties did not discuss the

attorneys’ fees and expenses until the parties agreed on the
48

material components of the settlement. The small number of

objections and the objections’ lack of merit indicate that the

class is satisfied with the fee award. See Varacallo v. Mass.

Mut. Life Ins. Co., 226 F.R.D. 207, 251 (D.N.J. 2005) (finding

that fewer than 50 objections to attorneys’ fee request in a

class of 3 million supported approval of fee award). 

The third factor, the skill and efficiency of the

attorneys involved, supports approval of the fee request. Class

counsel is highly skilled in this area and has extensive

experience in litigating class actions on behalf of insureds and

other parties against insurance companies. Counsel for the

defendants is nationally-recognized as being a leading firm in

the defense of class actions and those involving insurance

products. Class counsel has vigorously litigated, and defense

counsel has vigorously defended against, the claims on behalf of

the class. See Pls.’ M. 68. 

The fifth factor, the risk of nonpayment, also weighs

in favor of the fee request. Class counsel undertook

representation on a contingency basis and advanced hundreds of

thousands of dollars in expenses. As stated above, this case

involved complex issues of law, and class counsel prosecuted this

case for more than five years, without any guarantee of payment. 

Given the complexity of the case and the effort and risk involved
49

in prosecuting the action, the fee request is reasonable.

The sixth factor, the amount of time devoted by

counsel, further supports the fee amount. Class counsel

documents 16,212 hours of contingent work on this litigation. 

These hours worked justify the amount of the fee petition and are

further confirmed by the reasonable outcome of the lodestar

cross-check, discussed below. See Pls.’ M. 70.

The seventh factor, the awards granted in similar

cases, also supports the fee amount. Class counsel’s sought fee

award of 3% to 9% of the settlement amount fits comfortably

within the range of approved fee amounts for similar cases. One

district court in this circuit created a chart for fees in

insurance sales practices cases and demonstrated that approved

fees range between 6.5% and 14.5% for settlements valued between

$90.1 million and $1.8 billion. Varacallo, 226 F.R.D. at 253-54. 

The Court of Appeals for the Third Circuit has approved a higher

percentage than that sought by class counsel, affirming an award

of 21.25% of a settlement valued at approximately $100 million. 

In re AT&T Corp. Secs. Litig., 455 F.3d 160, 167-170 (3d Cir.

2006). 

The lodestar cross-check analysis further supports the

reasonableness of the attorneys’ fee request. Under the lodestar

method, the court calculates the proper fee by multiplying the
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number of hours spent on the litigation by an appropriate hourly

rate, creating the lodestar calculation. See In re Gen. Motors,

55 F.3d at 819 n.37. The proposed fee is then divided by the

lodestar calculation, resulting in a lodestar multiplier. In re

AT&T Corp. Secs. Litig., 455 F.3d at 164. The multiplier

attempts to account for the risk of nonrecovery and the quality

of the attorneys’ work. Id. at 164 n.4. Although the resulting

multiplier need not fall within any pre-defined range, the Court

of Appeals for the Third Circuit has noted that multiples ranging

from one to four are frequently awarded in common fund cases when

the lodestar method is applied. See Prudential II, 148 F.3d at

341.

In this case, the lodestar for class counsel is

$7,942,757.50, based on counsel’s current hourly rates that the

firm customarily charges its hourly clients. The multiplier is

2.3 and is safely within the range of multipliers awarded in the

Court of Appeals for the Third Circuit. See Auerbach Decl. ¶ 5

and Ex. 2; Hargrove Decl. ¶ 8 and Ex. 1; Declaration of Glenn

Manochi, Esq. ¶ 5 and Ex. 1 (“Manochi Decl.”), attached to Pls.’

M.; Declaration of David S. Senoff ¶ 5 and Ex. 2 (“Senoff

Decl.”), attached to Pls.’ M.; Declaration of Jacob A. Goldberg ¶

5 and Ex. 2 (“Goldberg Decl.”), attached to Pls.’ M.
51

2. Reimbursement of Out-of-Pocket Expenses

Class counsel seeks $550,159.50 in expenses as part of

its overall attorney award of $18.25 million. The attorneys

comprising class counsel set forth their expenses in declarations

accompanying the plaintiffs’ motion for final approval of the

settlement. The categories for expenses include: consulting and

expert witness fees; mediation fees; photocopying; IT, legal

research, and publications; mail and delivery charges; long

distance charges; travel and living expenses; witness fees and

service of process. See Auerbach Decl. ¶ 6 and Ex. 2; Hargrove

Decl. ¶ 9 and Ex. 2; Manochi Decl. ¶ 6 and Ex. 1; Senoff Decl. ¶

6 and Ex. 3; Goldberg Decl. ¶ 6 and Ex. 3.

The totals for each category are reasonable expenses

for a large, complex, multi-year litigation. The Court therefore

approves class counsel’s request for a fee award of

$17,699,840.50 and an out-of-pocket expenses award of

$550,159.50.

D. Incentive Payments to the Named Plaintiffs

Class counsel requests incentive awards to the named

plaintiffs in the aggregate amount of $115,000. Specifically, it

seeks an award of $10,500 to Beryl Price, Charlotte Price, the

Estate of Joseph Healy, George Miller, Richard Stein, Dena Stein,

Mary Lynch, Dorothy Eddy, Evelyn Edwards, and Jean Ryles. It
52

also seeks an award of $5000 to Michael J. Quinn and Catherin M.

Quinn. The distribution of the incentive award reflects the

named plaintiffs’ involvement in the prosecution of the case and

in discovery. Mr. Diggle objects to the incentive awards

requested, arguing that all of the plaintiffs should receive the

same relief.

The Court finds that the incentive awards are

reasonable compensation considering the extent of the named

plaintiffs’ involvement and the sacrifice of their anonymity. 

The named plaintiffs prepared for and testified in depositions

that exposed their private financial affairs, they participated

in preparing responses to interrogatories, and they produced an

extensive amount of documents. They undertook efforts that

benefitted the class, and the Court finds these awards justified. 

III. Conclusion

For the reasons herein stated, the Court grants the

plaintiffs’ motion for final approval of settlement, class

certification, and award of attorneys’ fees and costs and

incentive payments. The Court hereby certifies the class and

approves the settlement in this class action as described in that

motion and as amended at the fairness hearing.

An appropriate Order shall issue separately.